Scientific Management Is Past Its Peak

Sure, algorithms and software tools can help streamline any business. But, says Roger Martin, more executives are rediscovering that gut instinct is what keeps a company vital

by Roger L. Martin

A couple of weeks ago, I went to a dinner on the politics and economics of global outsourcing. Primarily I went to see the bright young writer Fareed Zakaria, author of the now famous Foreign Affairs article The Rise of Illiberal Democracy, because my agent, Tina Bennett, told me I would love him and she is pretty much always right. The second speaker for the evening was Martin Baily, former chair of President Clinton's Council of Economic Advisers and currently senior adviser to the McKinsey Global Institute, which is the think tank of the world's premier management consulting firm.

Rather than focus on outsourcing, Baily gave a speech on McKinsey's annual report on Ten Trends Shaping the Future Corporate Landscape, a couple of which fortuitously pertained to the evening's subject. As he went along, things made good sense: economic activity shifting towards Asia; the emergence of a billion new consumers; resource demand outpacing supply; changing global industry structures.

Frankly I was fading a bit. Then, boom! Trend No. 9: the rise of scientific management and its triumph over gut instinct and intuition. Baily waxed eloquent about how great this was and what an advance it represented for the world of business.

Now, I'll concede that if the McKinsey folks had been referring to the recent past, they'd be right. Scientific management has indeed been on a steady rise—we have all the trappings from Enterprise Resource Planning (ERP) to Customer Relationship Management (CRM) to Total Quality Management (TQM).

However, this pitch was about trends shaping the future landscape. And as I listened, I thought that an equally plausible interpretation is that the scientific management of business is in the final stages of bloated excess and reflexive self-importance—a supernova ready to blow.

The Poker Face of Science

Intrigued by this schism, I went to the McKinsey Global Institute Web site to see what exactly they meant by Trend No. 9. Did Baily overstate the case in his speech? Or, in my post-dinner stupor, did I hear him wrong? Neither: Baily was tame in comparison to the Web site:

"9. Management will go from art to science. Bigger, more complex companies demand new tools to run and manage them. Indeed, improved technology and statistical-control tools have given rise to new management approaches that make even mega-institutions viable. Long gone is the day of the "gut instinct" management style. Today's business leaders are adopting algorithmic decision-making techniques and using highly sophisticated software to run their organizations. Scientific management is moving from a skill that creates competitive advantage to an ante that gives companies the right to play the game."

Whew! That is heady stuff: managers reducing the whole of business to a set of algorithms and some sophisticated software. No more gut instinct. "O brave new world, that has such people in't!" to borrow from Aldous Huxley who borrowed from Shakespeare—or perhaps from the infamous supercomputer HAL.

An Analytical Utopia

Having lived for many years in a high-end strategy consulting firm, I can understand the appeal to the young minds at McKinsey Global Institute of such a Cartesian, deterministic, analytical world. Arguably, the firms hire their raw talent on the basis of its capacity for high-powered quantitative analysis and train it in more quantitative analytical techniques before putting it to work for long hours crunching algorithms.

So I can appreciate why they would see the increasing use of business algorithms and software as indicative of a future world they would love to see. Yet the reality is that consumers, competitors, and clients often act in 'irrational' or 'political' ways.

So I can't help but wonder whether the McKinsey team's desire to see an analytical utopia overwhelmed the objectivity of their trend analysis.